MicroStrategy Stock and Bitcoin Price Correlation: Explained

Key Takeaways

– 1 in every 127 Bitcoins is owned by MicroStrategy.
– MicroStrategy stock price closely tracks the price of Bitcoin.
– Investing in MicroStrategy provides an alternative means of Bitcoin exposure.
– Despite price correlation, there are additional risks to consider.
– Concerns exist regarding the centralization of wealth.

When searching “MicroStrategy” on Google, you’ll find that it is described as “an American company that provides business intelligence, mobile software, and cloud-based services.” However, in reality, MicroStrategy has become an investment vehicle for Bitcoin. Under the leadership of Michael Saylor, MicroStrategy currently owns a staggering 152,800 Bitcoin, which amounts to 0.79% of the circulating supply. In simpler terms, 1 in every 127 Bitcoins is now owned by MicroStrategy. This significant ownership is worth exploring in terms of its impact on the company’s stock price.

Performance vs Bitcoin

It comes as no surprise that MicroStrategy’s stock price is highly correlated with the price of Bitcoin. Since the company started purchasing Bitcoin, the correlation has become even stronger. The numbers further highlight this relationship. While MicroStrategy has generated an average revenue of $497 million and average EBITDA of $50 million in the last three years, these figures are overshadowed by its holdings in Bitcoin, which are currently valued at around $4 billion. The company’s market cap is only slightly higher at $4.7 billion.

Plotting the performance of MicroStrategy against Bitcoin since the first Bitcoin purchase in August 2020 reveals a strikingly similar path for both assets. However, it’s important to note that investing in MicroStrategy stock is not the same as owning and holding Bitcoin yourself, as the famous saying goes, “not your keys, not your coins.” Nevertheless, for institutions that are unable to purchase Bitcoin directly due to regulatory and compliance reasons, investing in MicroStrategy presents a viable option for exposure to Bitcoin’s price.

Centralization Concerns

While MicroStrategy’s role in providing exposure to Bitcoin is beneficial for investors who cannot purchase Bitcoin directly, it raises concerns about centralization. Bitcoin was built upon the principles of decentralization, yet one company now owns a significant portion of the Bitcoin supply. As MicroStrategy continues to accumulate Bitcoin and inch closer to owning 1% of the supply, it challenges the vision of democratized wealth that Bitcoin often portrays. Additionally, research has shown that the top 10,000 Bitcoin investors control one-third of the total supply, and the anonymity surrounding the ownership of a significant percentage of Bitcoin adds to the concerns of centralization.

Although MicroStrategy is known and admired in the cryptocurrency space, the accumulation of a large chunk of the Bitcoin supply by a single entity goes against the decentralized nature of Bitcoin. However, it’s worth noting that despite its imperfections, Bitcoin still remains the closest representation of decentralization in the monetary sphere that exists today. While there will always be a top 1% controlling a significant portion of wealth, Bitcoin provides an alternative and decentralized avenue for individuals to participate in the financial world.

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